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Closing Bell

News/Business. Maria Bartiromo, Bill Griffeth. A guide through the most important hour of the Wall Street trading day. New. (CC) (Stereo)

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01:00:00

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San Francisco, CA, USA

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Comcast Cable

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Virtual Ch. 58 (CNBC)

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mpeg2video

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ac3

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528

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480

TOPIC FREQUENCY

Us 9, Boehner 8, America 7, Gm 7, Ford 5, S&p 4, Simpson Bowles 3, Erskine Bowles 3, Washington 3, Rick Santelli 2, The S&p 2, Carl 2, Unitedhealthcare 2, Dell 2, Sam 2, Schwab 2, Bob 2, Geico 2, North America 2, Steve 2,
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  CNBC    Closing Bell    News/Business. Maria Bartiromo, Bill Griffeth. A guide  
   through the most important hour of the Wall Street trading day....  

    December 3, 2012
    3:00 - 4:00pm EST  

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you have probably heard princess kate and prince harry are expecting a baby do you. the royal baby will be worth $72 billion, the amount of the monarchy brand. i didn't know they had a brand. >> thanks for watching. >> "closing bell" is next. we have breaking news. a gop counteroffer on the fiscal cliff is just being released. let's go to e-mailen j amon jav >> they say boehner is offering multi-step solution here, including what he's after is $800 billion in revenue through tax reform. that's obviously significantly less than the $1.6 trillion the
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president asked for his-n his initial offer last week. other details in this offer being reported by nbc. health savings of $600 billion. other mandatory savings of $300 billion. a revision to cpi of $200 billion. and further discretionary savings of $300 billion. guys, it looks like the horse trading is alive and well here in washington. now this offer being extended from the republicans. you can assume that the white house will not think this is enough tax revenue to go forward, but, of course, offers are being exchanged here so that's a sign negotiations are under way, guys. >> let's get into the details here. $600 billion in health savings. what does that mean for medicare? break it down in terms of where these savings come from. >> i wish i could. what we don't have here is a lot of detail hanging off this christmas tree at this point. we're looking at a couple of bullet points being released now in terms of the scale of the deal. it gives us overall broad
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numbers. presumably negotiators would have to go in and fill in details of how they're get that kind of savings. there have been a lot of proposals on health of finding billions of dollars of savings by reducing overhead and other things like that. you've seen the unions come out and say they don't want to see any changes at all that would hurt payoffs to beneficiaries in terms of health care. that would be one of the sticking points between republicans and democrats. we would have to see more detail from boehner's office and how they plan to get to the number of $600 billion. >> broadly speaking, these numbers are similar to where they left it on the table last year during those failed negotiations for the grand bargain. these numbers are similar to the simpson/bowles reduction plan, too, aren't they? >> that's right. this sounds a lot more like where they were in the summer of 2011, as you point out, than what the president talked about last week. >> so essentially the republicans are -- the republicans are coming back with what -- where they left it last year and the president has
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offered what he had been saying all through the campaign this year. they're starting with this very same numbers they've been talking about all this time? >> yeah, that's exactly right. clearly what the republicans are saying is, we're willing to go this far and not much further. and what the president is saying, you know, if you read between the lines is, hey, i won the election. i've got the political upper hand here. i need more than where we were in 2011 because we had a whole election in 2012 focused on almost exactly this issue. the white house thinks they have the political upper hand here. this response is boehner saying, not so fast, mr. president. >> in terms of -- i know you don't have details on the medicare. are there any details on where the revenue comes from? in terms of exemptions and loopholes? do we know if all the exemptions and loopholes are taken off the table? for example, if mortgage and charity is still there? >> we just have detail describing this as revenue through tax reform. presumably there would be some changes to the revenue code that would get you the $600
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billion -- i'm sorry, $800 billion in additional revenue the speaker is talking about here. where he gets that from, we'll have to get that answer from the speaker's office. you can imagine right now their phone lines are scrammed and operators are not standing by. >> thanks. you have to start somewhere. >> let's get reaction. s & p capital, jeff cox at cnbc headquarters and rick santelli in chicago. sam, where do you stand on all this? what's your take in terms of republicans coming out with their plan, post the president's plan released this weekend as well? both plans where we left off with the last bargaining going on? >> i think, once again, what we're finding is that congress can teach shakespeare something about drama. i think they'll wait it out until the 11th hour and even allow us to fall off the cliff. it's easier to look like a white knight if they're reactive
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rather than proceed active. >> last week when the markets were volatile, now they are taking it in stride. we're coming back a little bit but not the volatility from last week. a little complacency or are we getting used to the drama out of washington? >> i think we're getting used to it? i think it's worth noting that on the 16th when we started to get this good news trickling out, the 19th when we got this big rally, the market stopped trading as correlated as it was prior to that. from the election until the 16th, every sector went down the same way in -- on exactly the same day. now things have switched up a little bit so you're seeing risk-on sectors like the small caps, biotech, tech. also safety sectors like staples, all those have moved up and past where the election day numbers were prior to everything selling off. so, what makes that interesting is that other sectors have rallied back to almost flat or
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not quite flat. housing, right, housing, but housing has had a terrific year. why would anybody be, you know, crazy about putting themselves more into housing after you had this great year and you know the mortgage interest deduction is on the table? people are not getting in there just right now. >> let me give you some more details on this latest proposal i'm getting from sources here. basically, the gop is saying that the offer was formally extended to the president by a letter signed by boehner. and basically saying that it is -- it is -- majority leader eric cantor, kevin mccarthy, kathy mcmorris, rogers, budget committee, ball ryan and others, they're saying rather than fire back at democrats' unserious offer with a counterproposal, we would be unwilling to support, republicans are putting forth an offer that cuts to the chase and seeks again, speaker boehner, the day after the election, to
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jumpstart substantiative, good faith, bipartisan to pass congress. rick santelli, do you believe the markets are buying into this latest offer and do you believe we're beginning a serious negotiation here? >> if i look at your market to answer your first question, no. by looking at the markets, selloff in treasuries but i think that's mean reversion from earlier. i don't see a market reaction. now, in terms of the grand plan of something actually starting to move from this maybe first good, i can't say. i can tell you if you look at treasuries, the s&p versus ten-note yields, the market doesn't seem to be buying into much of anything. the correlation after you came down from 2%, when stocks were going down, now they went down, we're nowhere near 2%. you'll continue to see mutual
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funds and unphased. >> fewer loopholes and lower tax rates is what's coming out. it is sort of a reiteration of their position at this point. it comes at a time when economic data coming out shows weakness when they show negotiations for fiscal cliff. >> this ism number that came out today was a disaster. i don't think the market really appreciates just how bad this was for the economy. this is a multiyear low reading in the manufacturing numbers. we haven't seen a number like this since 2009. we haven't seen an employment index number like this since september of 2009, the last time it was at this level, unemployment, 9.8%. we have a nonfarm payrolls number coming out on friday. you'll be lucky to see a positive number in front of that. i don't see how the market overcomes that kind of thing. independent of all this jibber
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jabber over the fiscal cliff, the economy is in really rough shape now. >> it is. we're seeing businesses cut back, getting ready for the eventuality they see coming, no deal by december 31st this worsening. sam, how do you want to be invested in 2013? where is the growth in the economy coming from, if anywhere? >> i think the growth is coming from an improvement in the housing sector. i think we are starting to see a slowdown in the job loss from the government sector. so, i think we're going to be seeing a better than half speed recovery. so, you do want to be taking a balanced approach. we do favor the consumer discretionary at this point offsetting with health care. >> gentlemen, thank you. more breaking news coming away right now. thanks for your thoughts. appreciate it. >> we have the letter. let's get to eamon javers. >> this is the letter speaker
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boehner sent to the president of the united states. the language he's choosing is important to understand, as he draes the president. the speaker saying, after a status quo election in which both you and the republican majority in the house were re-elected, the american people rightly expect both parties to come together on a fair middle ground and address the nation's most pressing challenges. the speaker characterizing this as a status quo election. that's not the way the white house sees it. the white house sees it as an election they won and they picked up seats in the congress. the speaker here reminding the president, hey, you know what, we control the house of representatives. he goes on to characterize the president's proffer from last week. boehner saying, we cannot in good conscience agree to this approach which is neither balanced nor realistic. they talk about possibly raising some entitlement reform proposals with the president. but then the speaker and his co-signers here have this sentence, mindful of the status
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quo election and questions on entitlement reform we recognize it would be counterproductive to privately or publicly propose entitlement reforms you or the leader of your party are unwilling to changed in near term. boehner is laying out a revision going back to the simpson/bowles plan in some way, shape or form and that's the gist of this offer from the speaker to the president. we're diving into it in real time and we'll get you more details as soon as we have them. >> we're looking at it right here. white house offer, tax rate increases of $960 billion. elimination of deduction, $600 billion. now the house republican counter. revenue through tax reform, that means lower taxes, but tax reform, $800 billion. >> closing of loopholes and capping deductions. >> right. health savings, $600 billion. mandatory savings, $300. further discretionary savings, $300 billion.
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house republican counter getting you $202 trillion compared to the white house offer of $1.67 trillion, bill. >> we identified both sides now. >> and we begin. >> let's get them in the middle and find some middle ground there, somewhere, somewhere, in time. we'll see. meantime, market taking it in stride as we head to the close with 50 minutes left in the trading day. the dow down 41 points. at the low of the day we were down 56. >> we're going to start hearing the impact of sandy as we approach the holiday shopping season. sandy stimulated sales of new cars last month. see which automaker drove away with bigger gains, ford or gm. >> then pain at the pump. our next guest is warning a new ethanol fuel blend that not only costs more but adds to the cost of food could damage your car and void your warranty. really? you're going to want to hear this coming up. and banks be aware. a third of americans would rather get a mortgage from
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walmart than a bank, even though walmart doesn't offer them, at least not yet. we'll hear from somebody saying offering home loans would be a boone for walmart stocks. [ male announcer ] this december, remember -- you can stay in and share something... ♪ ♪ ...or you can get out there with your friends and actually share something. ♪ the lexus december to remember sales event is on, offering some of our best values of the year. this is the pursuit of perfection. offering some of our best values of the year. when you take a closer look... ...at the best schools in the world... ...you see they all have something very interesting in common. they have teachers... ...with a deeper knowledge of their subjects. as a result, their students achieve at a higher level.
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welcome back. the clash over ethanol accelerating between aaa and renewables fuel industry. aaa is calling on the government to stop forcing gas stations to send a blend of gas called e-15, 15% ethanol and 85% gasoline, saying it could damage car engines as well as void your warranty. >> when i was driving in the minute west this summer i saw e-15 stations available in kansas and nebraska. it prompted renewable fuels association to fire back at aaa insinuating the auto club has become a mouthpiece for the oil industry. let's sort this out. president and ceo of aaa, and president of renewable fuel association. what specifically does e-15 do to harm vehicles? what is it you're suggesting here? >> well, first of all, we've done some research that shows that 95% of the american
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motorists don't know what e-15 is and don't actually know whether they should be putting it in the tank of their car. and the auto manufacturers have advised us that 95% of the vehicles on the roads today in this country are not designed to burn e-15. and that if e-15 is put in those cars, it could invalidate the warranty and possibly cause damage. the damage appears to be principally in the form of accelerated wear. and that has been verified by some research done by the crc. >> so, bob, you say critics like aaa want to kill e-15 because of ethanol? what is your argument? why would they want to kill e-15? >> well, look, there's no evidence to suggest that there are any problems associated with e-15. e-15 has been the most tested fuel in the history of the environmental protection agency. in fact, there were 86 cars
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tested over three years. the miles driven by those cars are the equivalent of six round trips to the moon. you could not have tested e-15 any more. and the only problems that were found is a couple of deer were killed on the test track. >> okay. let me ask you this, according to aaa -- bob, i want you to tell you whether you believe this to be true or not. according to aa, bmw, chrysler, toyota, nissan do not cover damage under warranty. hyundai, kia, volvo have said e-15 might void their warranties. do you dispute that? >> ford and general motors have warrantied e-15 for 2013 vehicles and on, which is the first year they were able to provide warranty coverage because prior to that the epa did not allow e-15 be sold. prior to that you couldn't
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anticipate e-15 was going to be sold. thus, provide warranty coverage for it means nothing. mtve was a gasoline additive used in this country for years that never had warranty coverage. doesn't mean there are problems to vehicles. there's no evidence to suggest there is. >> what about that, bob? >> well, i have -- i have a dozen letters on my desk from the major autostating exactly what you said. the use of e-15 in vehicles prfshd prior to 2012 could cause damage to the engines. 95% of the driving public doesn't know what e-15 is. i have a question to ask my friend bob. >> very quickly. >> i have the e-15 retailers' handbook the rfa put out and it says in here some underground tank systems and equipment may not be compatible with e-15, some equipment and service stations both new and used
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demonstrated limited ability to safely accommodate exposure to e-15 and may violate fire codes. my question is -- >> real quick. what's your response to that? >> it doesn't -- if it isn't safe in your tanks, why would it be safe in our tanks? >> some tanks are pretty darn old. there's no mandate to use it. it's a consumer choice. there's only a handful of gas stations offering it today. ethanol is cheaper than gasoline. e-15 would be a cheaper fuel for some consumers that want to use it. >> is it safe? bottom line, is it safe? >> it's absolutely safe. epa went through years of study on this. >> bottom line -- >> the letters he's referring to say there might be problems because they haven't tested the fuel. >> thanks, gentlemen. we'll keep watching this. we have to go. we have a market worsening here and more details on this gdp
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proposal. >> what can you tell us more about this republican counterproposa counterproposal? >> reporter: a couple thing. first of all, this counteroffer on health savings, medicare and medicaid, includes a raising of the medicare eligibility age from 65 to 67. this is something the speaker and the president came close to an agreement on in the summer of 2011. it also assumes a variant of the ryan budget proposal for medicare, which goes to -- from a normal fee for service medicare to some sort of premium support plan. mitt romney adopted that in the campaign. interestingly, pete domenici and allison rivlin advocated what romney campaigned on as a fundamental change in medicare. i do think this is a reflection of progress they're exchanging numbers on paper. i talked to the senate democratic leadership. they said, we're not going to
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react until we hear from the white house. the president is going to have a photo op in a few minutes with the bulgarian president. we'll see if the president gets thrown a question and whether he offers a reaction. haven't heard anything from white house staff so far in reacting to this, guys. >> essentially they're picking up negotiations where they left off in august of '11 when the grand bargain fell apart. isn't this what we're talking about here? >> that is right. the speaker's office clarified the proposal they essentially laid down is drawn from erskine bowles' individual testimony to the super committee in the fall of 2011. that is to say, not the simpson/bowles recommendation itself, but when erskine bowles testified and offered an alternative in trying to nudge them toward an agreement, this was not a republican proposal, per se, it was from erskine bowles. >> a prominent democrat. >> yes. >> thank you, john harwood. i can't believe we've had 13 months to figure out medicare, medicaid -- >> yes, you can. come o we're talking about
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congress. >> -- taxes, social security -- >> we're talking about politics. >> -- now down to the last 28 believes. >> of course you can believe that. that's how it works. it's human nature. did you study for your finals 13 months before you had to take them? you did not. >> that doesn't mean it's responsible. let's take a short break. 40 minutes before the closing bell sounds on the day. a market down 55 points on the dow industrials. >> ford and general motors getting a boost from all the folks who needed new cars after sandy. but is either stock a buy right now? we'll look at that in the charts coming up next. >> bill r millionaires an endangered species? find out why the number could dwindle in the new year.
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an improving economy and superstorm sandy turn out to be a boone for the automakers. >> one automaker did not beat expectations in terms of november auto sales. the automaker who fell short of estimates was general matter, an increase of 3.4%. 2% below what the street was expecting. some important stories that came out today from the auto industry. let's start with ford. 6.5% increase. the company today raising its production in north america for the first quarter by 11% up to 750,000. the most they have produced in the first quarter since 2006. general motors may cut production of its truckline because of bloated inventory. they're at 139 day supply. you want that down around 85 day supply.
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bmw and mini are on track to post best u.s. sales ever. today they increased 39% for the month of november. shares of automakers, despite positive news from ford, they were all down today. so, that's the latest with the automakers. by the way, we're expecting the monthly sales pace to come in above $15 million. we'll get that number here shortly. >> interesting story there. a lot of numbers moving up. thank you, phil. we've seen the sales numbers, but what about the stocks. how do you invest in this group? which automaker could have your portfolio shifting into high gear? we start talking numbers right now. looking at versus ford. carter worth, fundamental, steve cortez, always nice to see you. carter, check it out. tell me about the charts and the technicals. what do the charts tell you, gm versus ford. >> the first chart is a comparative chart, just that, gm versus ford. very clear optically, 75%
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correlation. the truth is, we like them both. they're both bottoming out, if you will. they're both heretofore weak stocks improving. each has acted very well while the market was selling off in the september-october period. gm, well-defined downtrend. the stock moves above the down trend, breaks above that, if you will, and the pattern is the same for ford. same downtrend over the past year and a half. same move above the downtrend. again, each moving up in september and october. when the market was getting clobbered. very important. >> carter -- >> you like the technicals. steve, jump in. what about the fundamentals. >> i actually shorted gm this morning. both have had a great few weeks, couple of months but it's important to bring perspective. if you look at a long-term chart of ford, you see this stock is trading where it was in 1993. back in 1993 i was in college. i was doing beer bongs and listening to pearl jam. that was a heck of a long time
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ago to be at the exact same price point. when you hear stories about detroit's renaissance, detroit comebacks, have you to be skeptical but they term out as well as brett favre comebacks. >> sure. >> wow. wait a second, you shorted gm this morning? you shorted gm this morning? >> this morning. the reason i did -- >> that was actually a good play. truth is, gm is up quite a bit more than ford year to date. obviously, you picked out the one today that's quite weak. in '93 i was sloging away at my first or second job out of college. these have not been great investments long term and everybody knows that. general motors, the one we're looking at is new iteration. the last one being bankrupt. day to day, one can outperform the other. there's a new -- but there's a near term problem and more pronounced for gm. gm has been moving massive onto dealer lots. all-time record in terms of
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duration of supply so that does not mean real sales. i think this is a false good report out of most automakers and stocks are reacting accordingly, down on the day. >> what would you need to see to make you a buyer of these stocks? anything out there that you would say, okay, i see a change? >> maria, lower inventories. that's the key. we need to see real final sales move. again, this is a particularly pronounced issue for general motors. gm can actually start getting its inventories on dealer lots, under 700,000 cars, something it keeps talking about but unable to achieve in recent months, that would be a catalyst to the upside. i would no longer be short if that were to occur. >> we'll leave it there. thank you. we'll see you soon. steve, carter, thank you. >> to believe cortez doesn't do any of those things he did in college? i think not. the dow down 50 points, holding steady as we head toward the close. dish network is the latest company, yet another one to offer a special dividend. if you were watching "closing bell" on friday, you already knew this was coming. let's all remember.
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>> we own kitchen networks, for example. the founder owns 55%. he can save $500 million on taxes on the dividend alone if they were to announce i $5 billion special dividend in the next few weeks. >> there you are. thank you. coming up, we'll look at whether it pays to chase after the wave of special dividends being offered right now. can you make money after the announcement? plus, would you go to walmart to get a mortgage? nearly a third of americans would at least consider it, even though walmart does not offer them yet. is that a red flag for a bank? we'll look at that coming up. tdd#: 1-800-345-2550 this morning, i'm going to trade in hong kong. tdd#: 1-800-345-2550 after that, it's on to germany. tdd#: 1-800-345-2550 then tonight, i'm trading 9500 miles away in japan. tdd#: 1-800-345-2550 with the new global account from schwab, tdd#: 1-800-345-2550 i hunt down opportunities around the world
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welcome back. walmart may be the world's largest retailer but a surprisingly large percentage of americans surveyed said they would consider shopping there for a mortgage, even though it doesn't currently sell mortgages. diane looking at the increasing demand for alternative lenders out there. >> that's right. attention, mortgage shoppers. as you said, walmart does not offer mortgages but one in three americans said if it did they would consider getting one from giant retailer, according to a
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study by carlyle and gallagher. customers have a trust issue with big banks given the mortgage mess. in the survey, more than half specifically cited frustration with how slow the process is now with lenders. in addition to difficult communications and an inability to track the status of the mortgage application. some cited untrustworthy advice. researchers say it's also familiarity with retailers as most americans do banking online and rarely enter a retail bank. that and a shift in what customers want. they have moved away from wanting complex products into more fixed interest rates and defined terms, says cng. we contacted walmart about the survey. a spokesperson responded saying, walmart is committed to offering americans affordable access to every day money, services and does not plan on providing mortgages. but never say never, right? >> all right, never say never. in addition to walmart, one-third of those survey respondents said they would be
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willing to get a mortgage from paypal. but would it be a winning proposition for investors? is it a sign consumers would rather deal with those companies than banks. >> david straser who covers walmart said it would fit perfectly but vicker anthony, who covers ebay, which owns paypal says the company is not ready yet. david, why is this a good idea? >> one thing you say, it's the googles, apples, trying to build their ecosystem. walmart is trying to do the same thing from a different angle. if loans go bad, they would have different ramifications but it wouldn't be walmart's risk at that point. >> that's a big "f" in the mortgages go bad. >> we've seen that before. >> i would say if they were doing this it would be more as a mortgage broker.
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>> right. which is what costco does. >> right. it drives loyalty from customer base. people with that type of relationship with the retailer tend to shop there a lot more. >> what do you think? would the ebay investor see this as a positive for the paypal business? >> i think it's within paypal's realm to offer credit, bill me later, a big name and trusted user base but i don't think they're ready for several reasons. one, they don't have the expertise in-house. they would have to hire or acquire. it would just add to the complexity. 35ipal has its hands full with initiatives, paypal point of service with merchants, looking
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to expand to emerging markets. right now i think a mortgage product would not be congruent with growth initiatives. it would be a distraction. third, i would add to regulatory risks as well as increase licensing. that would be costly, time consuming. fourth, competition has increased significantly for paypal, visa entering the space, mastercard, square. it needs to continue focusing on a core industry. >> the mortgage industry is not exactly a growth industry. we're in a downswing in the housing market right now. >> there's no doubt, but you're talking about a share of the wallet. every mortgage walmart would they' theater et lick wallet they would know when people are moving into the area and bring them deeper into the walmart ecosystem. >> is that the demographic or
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income level doing well enough in order to buy homes? those are the folks being locked out of mortgages these days, aren't they? >> yes. walmart is still -- the amount -- their customers are very wide. obviously, it's not for all their customers but they wouldn't need a lot to actually have this be positively impact them. if anything, it would maybe get them to get to that higher earner customer, a more loyalty from that customer who may just shop there from food and not be the general merchandise. all of a sudden they're going to come in for housing-related stuff because they're getting that offer. >> sure. we'll leave it with you. gentlemen, thank you very much. >> thank you for your thoughts. >> brought up great points. thanks for your time. we are in the final stretch here. 20 minutes before the closing bell sounds. off the lows and off the highs as well, down 40 points on dow industrial average. >> one of our next guests says stocks will post a double-digit rally by the end of next year. his bullish call straight ahead.
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>> i'm ready for bullishness! >> she's feisty. the defense sector is in the line of fire for billions of cuts. we'll talk to the ceo of one company how he's preparing for a falloff later in the "closing bell." [ male announcer ] research suggests cell health
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welcome back. technology a bright spot, thanks largely to a move in dell. >> that's right. a rare bright spot in tech today. dell shares outperforming goldman sachs, upgrading two notches from sell to buy, net cash levels provide an opportunity for leveraged buyout. take a look at research in motion. recently a lot of optimism on the street ahead of the blackberry 10 device launch early next year. today, though, canaccord downwriting it saying it doesn't show the shares. they have gained 45% over the past month. back to pu. >> seema, thank you very much. i'm thinking of brian bewith us
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today. he's bullish on equities all year long. he has a target price of 1425, about 15 points away, which would be a good couple of rellys fr rallies. he's even more bullish for next year. the target for the end of next year on the s&p, 1575. that would be a smooth 10% move. >> will the fiscal cliff derail market gains? how will the outcome change strategies for next year? he joins us right now. 2013 report ahead. sticking to your guns, no matter what. why? >> first of all, america. the greatest country on the planet, let's just admit it. but america in terms of corporations has done a wonderful job of rebuilding balance sheets and providing cash flow. here's the kicker. providing consistent earnings growth. the next ten years will be about multiple expansion. we as investors will be willing and we want to buy those kind of companies that are giving us traditional, consistent
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earnings. we're going to pay for it. dramatically different than the last 10 or 12 years. >> earnings have been slowing. the fiscal cliff, by the way, whatever comes out of washington at the end of the month or the beginning of the first quarter, whenever it is, it's an austerity plan. it's not a growth plan. they're cutting back. they're not adding at this point. what else? there are other things going on that could put a crimp on the markets. >> layoffs. >> it's the first year of a new presidential cycle, which traditionally is the worst year for the stock market in the four-year cycle. take that, mr. bull. >> all right. >> go ahead. >> a lot of cycle stuff doesn't work, right? the past performance is not indicative of future results. that's the first thing i'll say. number two, in terms of the whole fiscal cliff situation, what's going to end up happening is we need to better match revenues and expenses. we're running a business in america.
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corporate america, consumer america. now it's the government's turn. not a matter of if but when something gets done. whether it's some arbitrary dade of december 31st or they kick the can down the road to february or may 14th or whatever, they'll get the deal done. they're going to get the deal done. from a psychological standpoint that will be viewed as a positive. think about it as an investor, as a whiteboard. you look at the u.s., throw if on a whiteboard, where else are you going to invest? you can't buy bonds, europe, emerging markets. you have to buy equities -- >> corporate bonds. >> maybe as part of that. but in terms of the whole total return funds you're seeing in these bond categories, you've had such rapid inflows, which is clearly a sign of a safety trade and psychological trade. they're not buying bonds based on fundamental but on fear. >> for yield. let's put aside all of this wrangling and let's say we get a deal done. we start to look at what that deal looks like. higher taxes, lower federal spending.
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right? i mean, when you look -- when you take away all of the fights and when you take away and go to the raw, what is left, you're talking about slower stimulus on a federal level because you've got higher taxes and because you've got lower spending from government. so, doesn't that hit earnings? >> no. here's why. we have found higher taxes are inconsequential with respect to stock market performance. stocks go up because the economy is recovering. if we were talking about the fiscal cliff two years ago they would never be able to let this fall through because we were close to recessionary times. we're out of recession. housing prices are beginning to recover. jobs are starting to come back. we're seeing, i think, a manufacturing renaissance back to north america. that is going to be positive through this. >> how much are you hanging your bullish hat on the amount of cash on the sidelines?
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you've identified already identified that. the fact corporations need to put that money to work, we're underinvested. your bullish call, seems to me, is based on those corporations finally getting off the dime and putting that money to work. is that the idea? >> it's a big part of it. how investment works, right, you build up capacity from a scarcity level, right? you have too much capacity and correct back down again. that was the '90s. we took on a bunch of capacitity and then the first ten years of this millennium we stripped out capacity when the rest of the world was building up capacity. now we have cash on the balance sheet we can start start cap ex, bring jobs back, buy other companies, we can still pay dividends and buy back stock. so far, the dividend increases we've seen from a secular, long-term basis are still very early in terms of dividend action. we think dividend groelt and quality growth are strong themes in america. >> have we spopoked all the hol we can into thinks bullish --
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>> and he jabbed right back. >> i like it. thank you very much, brian. >> thank you. >> nice analysis. >> see you later. heading to the close. 12 minutes left. coming back a little bit. the dow is down 32 point. >> companies are getting more concerned about the fiscal cliff. in fact, you won't believe how many are mentioning in their s.e.c. filings. will the housing comeback fall off the cliff if we don't get our fiscal house in order by the end of the year? the ceo of prudential joins us later.
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when we got married. i had three kids. and she became the full time mother of three. it was soccer, and ballet, and cheerleading, and baseball. those years were crazy. so, as we go into this next phase, you know, a big part of it for us is that there isn't anything on the schedule.
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how important is the fiscal cliff to the companies in your portfolio? apparently the answer is very. the blog footnoted counted 279 mentions of the fiscal cliff in s.e.c. filings for the month of november. that compares to 120 mentions of the fiscal cliff in october. there were none last year at this time, by the way. the first time i ever heard the fiscal cliff, first person i
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heard mention it, you, back in february. i'm wondering, what the heck is she talking about? >> it was in my bedtime reading. obviously, this is an important issue for executives. we talk to ceos all the time. it's not just their s.e.c. filedings but their commentary. remember james gorman writes a letters to his employees giving them a link, go scream at your congressman. your representatives. it's coming up. >> you wonder at what point this becomes a crutch, an excuse for companies to miss estimates on earnings. the way many retailers will say, the weather it kept people away from the. movie theaters. the fiscal cliff kept people from buying or service-oriented industries. >> first of all, let's take one sector, defense. very long term projects, right? the defense layoffs right off the bat if we go over the fiscal cliff, 600,000 people work in
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the defense industries. the top 14 or 15 companies, 600,000. right off the bat, 40,000 jobs get cut. >> i agree. >> those cuts continue into 2013, 2014 because of the nature of these long-term projects. this will ripple through the economy. not just defense. it's going to hit sentiment. it's going to hit -- because it's all layoffs. >> i agree. there will be others that will come through but i think they'll be using it as a crutch at some point as well. you have more coming up next hour. >> we really want to get into the cuts coming to state, city, the local governments. that's going to take money out of education, all the things we care about. so, the fact these lawmakers are sitting down and, like, sort of keeping with these opening salvos, it's frustrating. the time is over, bill. you had 13 months. we have 28 days left. >> moving on. we'll do the same, as a matter of fact. we're coming back for the closing countdown. after the bell, spending is not the only thing that will be
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significantly cut if we go off that cliff. robert frank is describing why the number of millionaires is also facing a cut. sfx- "sounds of african drum and flute" look who's back. again? it's embarrassing it's embarrassing! we can see you carl. we can totally see you. come on you're better than this...all that prowling around. yeah, you're the king of the jungle. have you thought about going vegan carl? hahaha!! you know folks who save hundreds of dollars by switching to geico sure are happy. how happy are they jimmy?
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2:30 left in the trading day. here is what happened to the dow, the manufacturing report out this morning, disappointed bs back below 50, meaning we're in contraction territory, even when the republicans announced their counterproposal on the fiscal cliff. no real movement there. a couple zigs and zags but we're going out on the low end, about 50 point. we'll quickly show you the charts of the dow, the s&p and the nasdaq, going back for the full year. we're back above the 200-day moving average in all three cases. it's the closest for the dow. we're right at the long-term trend line there. let me show you. i think the s&p is next here. the s&p and the nasdaq are well above their 200-day moving average. move it along, yes. again, these are not precise but you can see it's moving well above that. this is the nasdaq. and the s&p is well above its 200-day moving average. there you are. it's the strongest of those
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three percentagewise. warren, democrat is typically a pretty good month for equities. >> i don't know if it is this year. yes, traditionally it is. are with going to hit brian's target of 1475 by the end of the month? >> i don't know about that. >> there was a little hedge there. >> 1425. >> 1575 next year. 1425 this time around. what takes us there? >> we think it's industrials, the first part, because this move below 50 is a head fake. we've seen two this year and manufacturing came back. construction spending has been positive, too. the industrials look particularly timing. by the way, we think many investors are underweight those areas so we could see cash coming in. >> didn't have a lot of volatility on the fiscal cliff proposal. is the market taking a wait and see? >> there was heavy